UK economy grew 0.1% in August ahead of Healey's first Budget

The UK economy grew by 0.1% in August, the Office for National Statistics said, ahead of Chancellor Rachel Reeves' first Budget later this month. The figure beat analysts' expectations and followed growth of 0.4% in July.

The small rise came as the International Monetary Fund upgraded its outlook for the UK economy. Reeves still faces the challenge of delivering a balanced Budget without extra borrowing.

What drove the growth

Production, which includes manufacturing, oil and gas extraction and energy supply, increased in August. The services sector, the largest part of the UK economy, was flat, while construction contracted.

Over the three months to August, the economy grew by 0.7%. ONS director of economic statistics Liz McKeown said computer programming was the biggest contributor to what she called robust growth, but noted that production and construction shrank over the period.

An earlier estimate for June's monthly growth was revised up from 0.3% to 0.4%.

I'm pleased the IMF here in Bangkok backed our economic plans in London.

— Rachel Reeves

Economists and IMF reaction

Paul Dales, chief UK economist at Capital Economics, said the economy was more robust than expected. He warned that an expected rise in inflation would still dampen growth, but said the economy showed remarkable resilience to higher energy prices and borrowing costs.

PwC senior economist Jake Finney said AI infrastructure investment was supporting the UK's relatively strong performance. He said the UK still lags the US but is ahead of many European peers.

The figures were released after Reeves arrived in Bangkok for the IMF annual meeting. IMF managing director Kristalina Georgieva said the UK was seeing a bit of a better growth prospect than other G7 nations. Reeves said she was pleased the IMF backed the government's economic plans and promised to stay the path before delivering the Budget in two weeks.